Last month the French foods and beverages group Danone and the French supply chain software company ILOG went public (ILOG press release; article in the Journal du Net) with details of their implementation of a combined SAP and ILOG solution to Danone’s production planning needs at a major plant in Mexico.
SAP APO found insufficient for planning intermediates
Like many FMCG companies, Danone has rolled out SAP as part of a change programme to improve business efficiency and performance through simplification and the standardisation of best practice.
| The production of intermediate dairy products is particularly complex to manage. | |||
| On the one side, intermediate processed milk products have a very short conservation life; on the other side, there is a huge variation in demand. Furthermore, all sorts of production and conservation factors must be taken into account for the different process lines and vats for fermentation, pasteurisa- tion, etc. |
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| From the point of view of the planners, the biggest difficulty overall in dairy production planning is the management of the con- servation limits, particularly for the intermediates. Significant losses can occur if management is poor. |
As CIO Jean-Marc Lagoutte puts it, the aim was the standardisation of Danone’s core processes across all their subsidiaries, thus enabling more central control and monitoring.
In 2002 and 2003 a major SAP APO (Advanced Planning and Optimization) rollout made its way across the Danone landscape, and by the end of 2004 the APO implementation was considered stable.
Jean-Marc Lagoutte reported that SAP APO covered quite well the company’s needs for the planning management of finished products, but not for intermediate products.
As the latter are very important at Danone, particularly for the complex area of dairy goods production, it was important to find a tool that could complement APO and complete the solution.
ILOG PPO to complement SAP APO
In 2005 Danone kicked off a new supply chain “consolidation” project, aimed particularly at optimising APO. It was considered critical to have a system that could manage and optimise integrated scheduling across all intermediate and finished production lines, and the existing APO solution was not delivering fully on that vision.
To complete their planning solution, Danone chose ILOG’s planning optimisation module PPO (Plant PowerOps).
| The potential synergies that ILOG and SAP can offer in delivering sophisticated production planning and scheduling systems for manufacturing facilities have been recognised by industry analysts for some time. | |||
| AMR Research reported back in 2000 that “the powerful combi- nation of ILOG SA and SAP AG appears to answer the need for deeper functionality in manu- facturing planning and production scheduling applications when implemented in specific indus- tries.“ |
It was key that any solution would need to be well integrated with APO installations already in place, leveraging the existing investment.
PPO was able to deliver a solution developed with ERP integration at its heart.
The solution proposed by ILOG would use SAP APO PP/DS (Production Planning and Detailed Scheduling) as the master system for all data, with any data change automatically made available to PPO. Using this data, PPO would generate planning propositions, to be validated or rejected. Planners would be able to access PPO from the SAP environment, making moving between PPO production planning and SAP production orders very easy.
The delivered solution would allow Danone to move from weekly planning to daily planning, and would integrate the management of stock levels taking the whole production chain into account – allowing the ordering of primary materials to be optimised taking into account the specification and capacity of each tank, scheduled downtime for cleaning or changeovers, etc.
The result would enable increased collaboration between the manufacturing and supply chain departments, increasing the visibility of the impact of operational decisions and unplanned changes in demand, on production plans, inventory levels and order fulfilment rates, allowing the company to achieve the best balance between inventory levels and operational efficiency.
Pilot deployment in Mexico raises the bar on production planning best practice
Groupe Danone chose one of its largest fresh dairy plants, a facility at Irapuato in Mexico, as a pilot site for the combined ILOG and SAP planning solution.
It was a massive change project, as SAP APO had not yet been brought to the Irapuato factory, so ILOG PPO and SAP APO were implemented at the same time.
This was to be a real test of the proposed solution, given the size of the plant:
- 10 intermediate products and 120 finished products
- 15 to 25 packaging lines
- 100 tanks
- preparation, pasteurization, fermentation and storage stages
- management of cleaning to standards
- control of allergens
- batch traceability
- scheduled production and use of intermediate products within strict time windows
- efficient scheduling of cleaning and changeovers
Go-live was in August 2006, and Danone considers it a significant success.
CIO Jean-Marc Lagoutte reports that the planners are very satisfied with the capabilities of the system.
Optimisation of production planning and management has been seen throughout the chain: Danone remarks an improvement in scheduling quality and in throughput; shelf life management is greatly improved, wastage is reduce. Product loss has been cut by 50%.
The CIO remarks, “The ROI was achieved right from the first site.” And all those efficiency improvements are seen to contribute to improve customer service.
The whole production planning system (APO + PPO + the business rules and processes established by Danone) is now considered by the group as a standard core system, to be rolled out to all production sites.
The same solution is now being implemented in Russia, and Argentina is planned next.
Our plant in Irapuato is now equipped with an excellent planning and scheduling tool providing the best possible plans, while improving our operational flexibility and our ability to react quickly to unexpected events. Within Danone, the news is spreading quickly. We already have more requests for implementation in the next two years than we can satisfy.
Jean-Michel Egu, Head of Business Solutions and SAP Program Director
Nice example of a complementary APO implementation …
i can realise that the planning and scheduling tools like SAP are wonderful.In most contexts i have experienced the reasons for implementing an ERP tool are genuine but the ROI are difficult to realise.I can understand that implementing the enterprise system needs good tailoring.I think good implementation is the key to the success in Danone’s case.I can conclude that in most cases of poor expected returns the problem is therefore lack of alignment between the goals of the organisation and the objectives or functions of the ERP
good to see this.
Pl keep me informed about new cases
Prof.D.M.Apte